Griffin v. S.W. Devanney & Co., Inc., 88SC118

• Docket Nº: No. 88SC118
• Citation: 775 P.2d 555
• Case Date: June 19, 1989
• Court: Supreme Court of Colorado

Page 555

775 P.2d 555

Blue Sky L. Rep. P 72,982, 58 USLW 2044

Royce GRIFFIN, as Commissioner of Securities for the State

of Colorado, Petitioner, v. S.W. DEVANNEY & CO., INC., and Stephen W. Devanney, Respondents.

No. 88SC118.

Supreme Court of Colorado,

En Banc.

June 19, 1989.

Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Eugene C. Cavaliere, Deputy Atty. Gen., Suzanne A. Fasing, Asst. Atty. Gen., Denver, for petitioner.

No appearance by respondents.

Joseph C. Long, Norman, Okl., for amicus curiae, North American Securities Administrators Ass'n, Inc.

QUINN, Chief Justice.

Section 11-51-117(2) of the Colorado Securities Act of 1981, §§ 11-51-101 to 11-51-129, 4B C.R.S. (1987), states that "[n]o provision of this article authorizes the [S]ecurities [C]ommissioner or any of his officers or employees to disclose [any information filed with or obtained by the Commissioner and not made public] except among themselves or when necessary or appropriate in a proceeding or investigation under this article." In S.W. Devanney & Co., Inc. v. Griffin, 757 P.2d 1088 (Colo.App.1988), the court of appeals held that this statutory provision prohibited the Securities Commissioner from disclosing to other regulatory and law enforcement agencies information regarding possible law violations obtained by the Commissioner during an examination of the books and records of a securities broker-dealer operating in the State of Colorado. We granted certiorari to review the decision of the court of appeals, and we now reverse the judgment.

I.

A.

The Securities Act of 1981 became effective on July 1, 1981, and was a repeal and reenactment with amendments of pre-existing legislation known as the "Securities Act." Ch. 119, secs. 1-6, §§ 11-51-101 to 11-51-129, 24-34-104, 1981 Colo.Sess.Laws 632-58. The 1981 act establishes the Division of Securities within the Department of Regulatory Agencies and designates the Securities Commissioner (hereinafter referred to as commissioner) as head of the Division, with authority to administer and enforce all the provisions of the act. §§ 11-51-103 and 11-51-117, 4B C.R.S. (1987).

One of the primary purposes of the 1981 act is to protect the public from fraudulent and deceptive practices. It accomplishes this goal in several ways. It requires brokers and dealers ¹ engaging in securities transactions to register with the commissioner, §§ 11-51-105 and 11-51-106, 4B C.R.S. (1987), and requires the issuer of a security to file a registration statement with the commissioner, §§ 11-51-108 and 11-51-109, 4B C.R.S. (1987). The 1981 act also contains criminal and civil penalties for fraudulent or deceptive practices in connection with the sale of securities, § 11-51-123, 4B C.R.S. (1987), and delegates to the commissioner rulemaking authority, § 11-51-118, 4B C.R.S. (1987), investigation and subpoena power, § 11-51-119, 4B C.R.S. (1987), and authority to revoke and suspend the effectiveness of a registration statement, § 11-51-112, 4B C.R.S. (1987).

Under the pre-1981 version of the Securities Act, every licensed broker-dealer was required to keep such records as the commissioner prescribed by rule. § 11-51-111(1), 4 C.R.S. (1973). All of the records of a licensed broker-dealer were subject to reasonable periodic examinations by the commissioner, within or without the state, as the commissioner deemed necessary or appropriate in the public interest. § 11-51-111(4), 4 C.R.S. (1973). For the purpose of avoiding unnecessary duplication of examinations, the pre-1981 statute authorized the commissioner to cooperate with "the securities administrators of other states, the securities and exchange commission, and any national securities exchange or national securities association registered under the 'Securities Exchange Act of 1934.' " Id. The Securities Act of 1981 does not incorporate this provision relating to the commissioner's authority to cooperate with other agencies and associations in the matter of examinations. The 1981 act, however, does empower the commissioner to enter into arrangements and other working relationships with federal, state, and self-regulatory authorities with respect to the filing and maintenance of a central depository system of public documents. § 11-51-117(3), 4B C.R.S. (1987). ²

In somewhat broader fashion than the pre-1981 law, section 11-51-119(1) of the Securities Act of 1981 empowers the commissioner to make such public or private investigations within or outside the state as necessary to determine whether any person, not merely registered brokers or dealers, "has violated or is about to violate any provision of this article or any rule or order under this article or to aid in the enforcement of this article." Section 11-51-119(1) also states that, for the purpose of aiding in the enforcement of the act or in the prescribing of rules, the commissioner may require any person to file a statement as to the facts and circumstances concerning the matter to be investigated and may "publish information concerning any violation of this article or any rule or order under this article." In keeping with the commissioner's investigative and enforcement authority, section 11-51-119(3) of the Securities Act of 1981 states:

The securities commissioner may, during customary business hours, conduct examinations, without resort to subpoena, of the books and records of any broker, dealer, principal, financial principal, representative, or financial representative transacting business in this state, whether or not such person is registered in this state.

Central to the controversy in this case are the first two sentences of section 11-51-117(2) of the Securities Act of 1981, which state:

It is unlawful for the securities commissioner or any of his officers or employees to use for personal benefit any information which is filed with or obtained by the securities commissioner and which is not made public. No provision of this article authorizes the security commissioner or any of his officers or employees to disclose any such information except among themselves or when necessary or appropriate in a proceeding or investigation under this article. ³

B.

The facts of this case are not in dispute. In July 1982 S.W. Devanney & Co., Inc. (hereinafter referred to as Devanney & Co.) was operating as a broker-dealer in securities in Denver, Colorado. ⁴ Stephen W. Devanney was the chief executive officer of the firm, which was registered with the Securities and Exchange Commission of the United States. On or about July 26, 1982, the commissioner (i.e., the Colorado Securities Commissioner), through an employee and pursuant to section 11-51-119(3), 4B C.R.S. (1987), commenced an examination of Devanney & Co.'s books and records in order to determine whether the firm was complying with Colorado law. During the examination the commissioner's employee discovered various records that indicated possible violations of the securities laws of other states. The employee made copies of these documents for the purpose of transmitting them to the appropriate regulatory and law enforcement agencies of other jurisdictions. Stephen Devanney, however, refused to allow the employee to remove the copies of these documents from the premises.

On July 28, 1982, Devanney & Co. and Stephen Devanney filed a complaint in the Denver District Court for a permanent injunction prohibiting the commissioner from removing copies of records from the premises of Devanney & Co. and from disseminating such documents to any third party. The commissioner answered the complaint and filed a counterclaim seeking a declaratory judgment concerning his authority under the Securities Act of 1981 to remove copies of records from a brokerage firm without resort to subpoena and to disseminate these documents to regulatory and law enforcement agencies within and outside Colorado. Both parties filed motions for summary judgment with respect to the commissioner's authority to make and remove copies of the records of a broker-dealer and to disseminate such documents to other agencies. The Denver District Court ruled that the commissioner could legally make copies of Devanney & Co.'s records and remove the copies from the firm's office, but that section 11-51-117(2) of the Securities Act of 1981 prohibited the commissioner from disclosing such information to other regulatory and law enforcement agencies, even under an agreement of confidentiality, unless such agencies were involved in the enforcement of the Colorado Securities Act. ⁵

The commissioner appealed to the court of appeals, which affirmed the judgment. After noting that the language of section 11-51-117(2) was "clear on its face," the court held that the statute prohibited the commissioner and his agents from disclosing "information obtained in the course of an investigation to parties outside the office of the Colorado Securities Commission" without regard to the presence or absence of any agreement of confidentiality. S.W. Devanney & Co., 757 P.2d at 1090. The court of appeals found support for its holding in the fact that prior to 1981 the commissioner was authorized to conduct reasonable examinations of the records of a broker-dealer within and without the state as necessary in the public interest and to cooperate with other state and federal securities administrators for the purpose of avoiding duplicative examinations but no such provision was included in the Securities Act of 1981. We granted certiorari to consider whether the court of appeals correctly construed section 11-51-117(2) of the Securities Act of 1981.

II.

Basic rules of statutory construction must guide our resolution of this case. It has been often repeated that a court's primary task in construing a statute is to give effect to the legislative purpose underlying the enactment. E.g., Colorado Common Cause v. Meyer, 758 P.2d 153, 160 (Colo.1988); People v....